IIF Dollar Selection and Forecast

SHAFAQNA Türkiye – While the widening current account deficit continued to put pressure on the dollar/Turkish lira, the Institute for International Finance (IIF) maintained its dollar/Turkish lira fair value at 21.

In yesterday’s Global Macro Outlooks report, the agency said the fair value, which is the exchange rate level needed to close Turkey’s current account deficit, is $21 at the dollar/Turkish lira rate, which remains very optimistic compared to market estimates.

The report was written by Robin Brooks, IIF Chief Economist, Martin Castellano, Head of Research for Latin America, Ugrash Yulku, Head of Research for Eastern Europe and Turkey, and economist Jonathan Fortun.

The IIF report indicated that next month’s elections could be the end of Turkey’s credit growth model, and this situation will have a positive impact on the fair value of the Turkish lira.


The highlights of the report were as follows:

“The fair value of the dollar/Turkish lira is 21. Market sentiment is more bearish than we expected. But if Turkey’s upcoming elections pave the way for the country to abandon its credit-driven growth model, it could be a catalyst for a recovery in the Turkish lira.

The fair value of the Turkish lira that we measure has been gradually depreciating as repeated credit expansions in the past have increased the current account deficit.


Markets have also become very negative about the Turkish lira ahead of next month’s elections, and many believe that the dollar/Turkish lira will be well above the level we calculated. This pessimism is understandable, given the rapid expansion of the current account deficit, the driving forces behind this expansion, and growing expectations of devaluation.

While it is certainly possible to move slightly above 21 in USD/TL, we believe the pessimism in the market is excessive. The reason we think so is that Turkey could end the “credit-driven growth model” that, after elections next month, widened the current account deficit and plunged the lira into a cycle of devaluation.

Ending this credit-driven growth model would be positive for TL and may allow us to update our fair value estimate.”


This figure does not indicate that the exchange rate will rise to this level in a certain period, but rather to the level of the exchange rate that is considered necessary to close the current account deficit in the current economic situation in Turkey.

The IIF set the long-time fair value of the dollar for the Turkish lira at 5.50 to 6.30 on April 6, 2020, 7.50 on June 29, 2020 and 9.50 on May 2, 2021. to 16.5 in March 2022. In September 2022, the institution increased their number from 16.5 to 21.

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